Nasdaq OMX Group Inc and IntercontinentalExchange are withdrawing their bid for rival exchange NYSE Euronext, saying it became clear they would not win approval for the deal from the Department of Justice's antitrust division.

The withdrawal of the offer removes any doubt around NYSE Euronext's plans to sell itself to Deutsche Boerse AG for about $10.2 billion. NYSE Chief Executive Officer Duncan Niederauer refused to talk to Nasdaq and ICE about their offer, but some NYSE shareholders thought he should. (For a Reuters Insider show, click http://link.reuters.com/quq59r)

To me it's a clear signal that Deutsche Boerse's offer will go ahead, said fund manager Juergen Meyer of SEB Asset Management, which owns Deutsche Boerse shares. That's what I'm expecting, actually.

NYSE Euronext shares fell more than 9 percent in premarket trading, while Deutsche Boerse rose 5 percent in Germany.

Nasdaq and ICE first offered to buy the New York Stock Exchange's parent on April 1, seeking to thwart NYSE Euronext's proposed friendly deal with Deutsche Boerse announced in February.

The NYSE-Deutsche Boerse tie-up is also subject to regulatory scrutiny in Europe and the United States.

Nasdaq said earlier this month that it and ICE would go directly to NYSE shareholders in a hostile bid. NYSE's board twice rejected the $11.1 billion unsolicited bid.

In a statement on Monday, Nasdaq CEO Bob Greifeld said his company was surprised and disappointed with the U.S. government's decision.

Deutsche Boerse said in a statement that it acknowledged Nasdaq's decision and would continue with the NYSE Euronext deal process.

Nasdaq and ICE's competing offer, worth $11.1 billion last week, would have split NYSE Euronext into two. Nasdaq would have acquired NYSE's equities and equities options business, and ICE would have bought its London-based futures unit, Liffe.

But such a deal would have given Nasdaq and NYSE a virtual stranglehold on U.S. listings, an issue analysts said would raise red flags with U.S. regulators.

NYSE Euronext shares were down 9.3 percent at $37.08 in trading before the market opened, while Nasdaq OMX stock fell 1.5 percent to $26.51.

(Additional reporting by Edward Taylor and Christoph Steitz in Frankfurt; Editing by Lisa Von Ahn)

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